In 1709 (or was it 1710?) the Statute of Anne created the first purpose-built copyright law. This blog, founded just 300 short and unextended years later, is dedicated to all things copyright, warts and all. To contact the 1709 Blog, email Eleonora at eleonorarosati[at]gmail.com

Wednesday, 16 September 2015

Quantum Surveying the IPEC Way

When we report cases of
copyright infringement, we all too often concentrate just on the arguments and
evidence which lead to the outcome at trial: the winners and losers. For obvious reasons it
is rarely possible to look in detail at those cases which settle,
because the agreements usually bind the parties to confidentiality,
and slightly less rarely do we examine the separate hearings in which
quantum is assessed and awarded. There are two possible reasons
why these hearings are less commented upon: they are intrinsically less interesting as they have little bearing on
the law per se (ie they tend to be very fact specific to each case
therefore hard to draw inferences from), and they also tend to be less
extensively reported on Bailii and in the law reports.

However for those less
conversant with litigation - and this includes the growing number of
litigants in person - the process(es) by which quantum is assessed
can form an important element when considering whether to fight or
settle. For the layman to only consider such matters as the likely
damages after liability has been established, is rather too late. And
from lawyer’s point of view, occasionally a costs hearing can
involve a determining of which law which should be applied.

Returning to the
current case, it is only necessary to set out the facts in the most outline of terms, because the defendant admitted
liability at trial. The claimant, Absolute Lofts, is as its name
suggests, a company which specialises in loft conversions. It is
based and operates in London and has its own website. The owner of
the company, Mr Craig Colton takes photographs of work he has
completed and posts them on his company's website. There was no
dispute that he owned the copyright in these images and that he had
assigned the copyright to his company.

Artisan Home
Improvements Limited is a company operating in the Bradford area. In
around 2009, the company's owner (and second defendant) Mr Darren
Ludbrook expanded his existing small building business to include the
loft conversion market. He needed images of conversions for his
website in order generate interest in this new area of work. Although
he blamed his website designer, the court found that he either took
21 images from the website of Absolute Lofts and included them on
the Artisan website, or there were reasonable grounds for believing
he knew they were infringing images. The fact that potential
customers of Artisan were being misled in this way was not at issue
in the proceedings, although the judge took this into account when
assessing Mr Ludbrook’s integrity and general approach to business.

In something of a
departure from the normal structure of a court judgment, Judge Hacon
first outlined in some detail the methodology chosen to calculate
the quantum, before addressing the law which governs the
awarding of damages. In this case, the so-called 'user principle' was
followed. This principle is based on the construction by the court of
a hypothetical negotiation between claimant and defendant before the
act complained of, where each party would have been acting willingly
and without duress to achieve the same state of affairs (ie the use
of the 21 images) in a legal way. This differs from quantum based on
presumed (or provable) losses suffered by the claimant, or the
presumed ( or provable) profits made by the defendant arising out of
the infringement.

The first thing the
court looked at were the alternatives to using Mr Colton's images: Mr
Ludbrook could have commissioned his own photographer, or he could
have purchased licensed images from a stock agency (which is
ultimately what he did, once the letter before action was received
and he was obliged to take down Mr Coltan's images). Counsel for each side
provided their own estimates, supported by expert testimony, of the
cost of commissioning 21 similar photographs, which ranged between
£9,000 (the claimant's figure) and £700 (the defendant's lowest estimate), but the court rejected this analysis on the basis
that Mr Ludbrook was seen as a man "prepared to use the cheapest
images he could find that looked good enough and could pass for
photos of loft conversions done by Artisan" [22]. Instead, the
judge took the view that the best evidence was provided by what
actually happened when Mr Ludbrook was forced to find substitute
images - he obtained them from a stock agency for a total of £300.
This was the level of ordinary damages the court awarded.

The claimant had also
sought aggravated damages under Section 97(2) of the CDPA. This
subsection says a court may award additional damages having regard to
all the circumstances, but in particular to the flagrancy of the
infringement and any benefit accruing to the defendant by reason of
the infringement. However the judge found that he needed to consider
whether s 97(2) had been made redundant by the Enforcement Directive,
specifically Art. 13(1). This came about because the UK Regulations
which brought the Directive into force, state in Reg 3 (2) that
damages may be awarded based on taking all appropriate aspects into
account (this would include those factors covered in s 97(2)), or
damages based royalties or fees which would have been due if the
parties had agreed beforehand (the user principle outlined above).
However this strict either/or approach was not to be found to be so
rigid in the Directive (Art 13 1a and 1b). In the directive, the
wording for the second condition is: damages “such as at least the
amount of royalties or fees …” (my added emphasis). The court
decided at [48] that the Directive thus allowed the national courts
to consider additional damages, such as those contemplated by s
97(2), since Art 2 of the Directive permitted national differences in
the means of enforcement if they were more favourable for
rightholders than those provided for in the Directive. On this basis
the court felt it was appropriate to award additional damages on the
basis of the indirect benefits the defendant gained from the
infringement, that is to say the increased business in loft
conversions following the use of the images on the website. The
business accounts for Artisan over the relevant period were
inadequate to show the actual profits but turnover was clearly
substantial (around £500,000 in 2013 for example), and it had to be
assumed that this was in part due to orders won of the strength of
the website. The judge awarded an extra £6,000 in damages under
this head. This figure would have been the same he concluded, whether it was calculated
under the Art 13(1) process, or s 97(2) CDPA.

This is a somewhat
simplified version of the judgment, which interested readers are
encouraged to read for themselves in order to gain the full nuance
of the deliberations.

Postscript. Following the hand down of this judgment, counsel for Absolute Lofts returned to the court to ask for an amendment to the award of ordinary damages (the figure of £300). Their grounds for seeeking this were that when the court had taken the Shutterstock fees as good evidence of the real world cost of obtaining a licence for 21 similar images of loft conversions. However the full terms of the licence had been omitted from the trial bundle. The claimant had subsequently obtained these terms and found that amongst other things they contained the following:

“YOU [the licensee of the images] MAY NOT”:

[...]

12. Use an Image in a manner that infringes upon any third party’s

trademark or other intellectual property, or would give rise to a claim of deceptive advertising or unfair competition.
[...]
18. Use any Image (in whole or in part) as a trademark, service mark, logo or other indication of origin, or as part therefore, or to otherwise endorse or imply the endorsement of any goods and/or services.’
19. Falsely represent, expressly or by way of reasonable implication, that any Image was created by you or a person other than the copyright holder(s) of that image."

Clearly Artisan's use of the licensed images was in breach of these terms and so the licence was invalid. It follows that Shutterstock would either have charged more for the actual use, or would not have permitted such use at all. Either way the figure of £300 was the wrong basis for the award.

The judge then had to decide whether he was permitted to reconsider his judgment and award of damages without the necessity a new trial or an appeal. Fortunately earlier this year Mr Justice Birss had had cause to examine much the same issue in Vringo Infrastructure Inc v ZTE (UK) Limited [2015] EWHC 214 (Pat). Birss J concluded that where evidence was adduced after judgment had been given, the principles set out in Ladd v Marshall [1954] 1 WLR1489 might well be applied by the trial judge since he would have a better view of the facts than an appeal court.

HHJ Hacon stressed that while these principles are not decisive they are highly relevant to the current case:

“First, it must be shown that the evidence could not have been obtained without reasonable diligence for use at the trial. Secondly, the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive. Thirdly, the evidence must be such as is presumably to be believed or, in other words, it must be apparently credible, though it need not be incontrovertible.”

Counsel for Absolute Lofts argued that this was not new evidence, and therefore the first principle did not apply, but the judge disagreed. On the basis that these additional terms could have been discovered with reasonable diligence before the trial or at least before judgment, the first principle was not met and so the application must fail.

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